Distribution still rules, depending where you live

Jeremy Davies, CEO of Context opened the second day of keynoting here in the caverns of the Grimaldi Forum in ole Monaco.

Davies said Context has exclusive access to data from Western Europe distributors – the big names like Ingram the like – which is how the company tracks business. Context is also cosy with the vendors and has a huge database including final customer names.

The GTDC, the global gang of distributors, had a meeting last year and Context polled the disties – 48 percent had no idea about the costs of distribution. MDF (marketing development funds) – bungs from the vendor, inventory financing, logistics, price protection, warranties and returns showed that some two tier distribution costs a little more. When Dell was saying cut out the middleman a few years ago, they were thinking of that. In most of the major categories, two tier distribution is a cost effective route from a vendor point of view.

Context looked at the PC business to see how distribution was good for it. Above five PC vendors made up 80 percent of revenues in 2008. But by the end of 2010 this number had risen to seven. HP’s dominance has fallen and there are new entrants like Samsung. Context found in Q3 2009 just under 30 percent of PCs reached the market through distribution. It’s now 34 percent.

That Davies said that after years of decline,  PC ASPs rose by the end of 2010.

By Q4 2009 the storm from economic meltdown had abated, sales recovered and during 2010 Context saw seasonality return to its distributors. By the end of 2010 there was a 12 percent rise in revenues for the distie panel. By the end of Q4 2010 the growth rate was eight percent in revenues. “The negative trend had been completely reversed.”

ASPs continued to rise in 2010, he said. Computers is a third of everything Context’s distie panel, with growth in traditional notebooks, overall being a 5.3 percent, for telecomm products over 11 percent, and PC components up by over 22 percent.  

Over 60 percent of revenues from distributors went to SMBs last year, 25 percent to consumer/retail, and corporate around 12 percent across all countries Context surveyed.

Germany was the powerhouse of distie growth in 2010, and the UK did well too. The cuts due for this year hadn’t kicked in last year. In the corporate sector, towards the end of 2010 the financial services companies bought a lot of kit. The consumer belt tighting was very apparent.

IT distribution is still good for business and weathered the storm in 2010 really well.  No one is sure what is going to happen in 2011. Overall business is good but it really does depend on the country. The chances are that growth will be similar to 2010. There are some warning signs in the PC market.